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Spain to target tax fraud and trim government

Spain to target tax fraud and trim government
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Spain’s new conservative government is looking at streamlining the public sector in further cost saving efforts as it struggles to tackle the much larger than expected budget deficit.

A cabinet meeting also decided there will be a crack down on tax fraud in the hope of raising more than eight billion euros this year.

Personal and corporate tax returns will be examined more closely, tax inspectors will run additional checks to ensure workers are not being paid off the books and the government is to consider introducing limits on the use of cash for certain transactions to curb the black economy.

Spain’s different levels of government — central, regional and local — will come under increased pressure to close down, merge or sell off many of the around 4,000 companies, agencies and other organisations they own.

The latest austerity moves come just one week after Madrid announced further tax increases and spending cuts of almost 15 billion euros after announcing the budget deficit for 2011 will be nearer eight percent of GDP than the predicted six percent.

The country is teetering on the edge of its second recession in two years and economists fear the austerity measures will further depress the economy.

At the same time Economy Minister Luis de Guindos said Spanish banks will have to find up to 50 billion euros to shore up their balance sheets.

That money is needed to cover potential losses from devalued property after the bursting of Spain’s property bubble and it is a slightly bigger cushion than some analysts had expected.